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Council Cost Index

The Council Cost Index (CCI) for 2017 is 1.5%.  The 2017 CCI indicates that an average rate increase across the State of at least 1.5% is likely necessary to allow current levels of service to be maintained, assuming other revenue sources (e.g. grants) also increase in line with costs.

 The CCI is calculated using the three part index model developed for Tasmanian Local Government in 2013.

 

What is the Council Cost Index?

Since 2006 LGAT has published a Council Cost Index (CCI) to better reflect the cost increases associated with the delivery of Local Government services recognising that the CPI alone does not reflect cost increases across the range of council services. Until 2012 the CCI was calculated from a 50% weighted average of the CPI for Hobart and the Construction Cost Index for Tasmania (ABS). The construction cost index proved to be volatile and movements in some periods did not reflect the reality faced by councils.

LGAT sought to further refine the method for calculating the CCI and undertook a review of Local Government cost indexes developed by other jurisdictions. The review indicated that wage costs, road and bridge costs and the CPI are the most common elements used in Local Government cost indexes. In Tasmania, employee costs are a significant component of operating costs as are roads and transport costs.

Using this composition of Local Government costs a modified index has been adopted for Tasmanian Local Government from 2013 based on consideration of the wage price index, road and bridge construction index and the CPI for Hobart (20%). Unfortunately, the ABS does not keep specific indexation data for roads and bridges in Tasmania.  There is significant variation in the jurisdictional indices so rather than seeking to substitute another state’s data for Tasmania, it has been decided to apply the Australian roads and bridges index which represents and amalgam of all Local Government roads and bridges price movements in the country.  It is considered that the specific topographical issues existing in Tasmania coupled with the relatively small competitive market allow for the adoption of the national average.

The Council Cost Index provides an aggregated picture of cost movements at the State level. The mix of construction and non-construction activity varies from council to council. Similarly, there are parts of the State where construction costs have been increasing faster than the State average. Such factors will all be of relevance at the local level when determining the level of rate increase necessary to provide the desired level of service.

The attribution of the indices to the calculation are 55% WPI, 25% CPI and 20% Roads and Bridges.

2016 CCI

The Council Cost Index for this year was 1.87%. 

2015 CCI

The Council Cost Index  for this year was 2.48%.  



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